According to analysts, a tug of war between physical gold buyers and institutional sellers will put a floor under the metal. Buyers of physical gold think differently than ETF buyers. Physical buyers do not have confidence in the central banks who continue to pump liquidity into the market and eroding the value of money.

Just a month after gold suffered its biggest one-day drop in three decades, the precious metal has once again fallen victim to heavy selling pressure. But a tug of war between physical buyers and institutional sellers will put a floor under the precious metal, said analysts.

Spot gold extended its fall below $1,400 an ounce on Thursday, declining to as low as $1,386.89 in early Asian trade. The yellow metal has lost over 5 percent in the past week.

The stellar performance of equities, softer inflation expectations, and strength in the U.S. dollar – which makes gold purchases more expensive - is pushing institutional investors out of gold in search of higher returns. This has lead to selling by exchange traded funds that are backed by physical gold.

Gold ETFs saw their largest ever monthly withdrawals in April as investors reduced their holdings by 176 tonnes, according to the Financial Times which cited Barclays Capital.

However, Teoh said, buyers of physical gold think differently. "They don't have confidence in central banks, which are just pumping liquidity in the market [eroding the value of money]. There is no conviction in currencies. So it's a very different mindset."

"As a friend of mine says, gold is like a religion, you either believe in it or not," added Teoh.

Premiums for gold bars rallied to all-time highs in major cities in Asia including Hong Kong and Singapore on Thursday after the drop in prices fueled another round of buying, limiting supply, Reuters reported.

The fall in gold prices last month, which declined to below $1,450 on April 15, also spurred a wave of physical buying across several markets. In the world's largest consumer India, for example, gold imports surged 138 percent in April from a year earlier. While, the Perth Mint of Australia reported record gold bullion sales last month as lower prices drove a jump in demand.

So, Where Is the Floor?

Timothy Riddell, head of global markets research, Asia at ANZ expects gold to trade between $1,300 and $1,500 in the coming months before recovering to around $1,600 by the year-end, supported by persistent physical buying and concerns about long term supply.

However, based on technical analysis, he expects further downside in the near-term.

"Gold liquidations are continuing and the fact that we couldn't get back to $1,440 over the past 36 hours suggests the downside pressures for a retest of lows of $1,320 are very much in place," he said, adding that another close below $1,380 could trigger a move lower to $1,300 after which a base would likely form.